For intermediaries

Please note: Leeds Building Society only accepts mortgage applications from intermediaries where they are providing an advised sales service, with the exception of Buy to Let & Holiday Let applications. It is the responsibility of the intermediary to ensure that all applicable law including, without limitation, the Financial Conduct Authority rules on advised mortgage sales are complied with including, without limitation, the provision of adequate explanations.

Right to Buy – fact vs fiction

While Right to Buy has been around since the 1980s[1], the Government plans to roll out the scheme to 1.3 million Housing Association properties (which is expected to come into effect soon) and the scheme is once again a hot topic. With Right to Buy back on the radar, we separate the facts from the fiction to keep brokers in the know.

Fact: Lending up to 100% is typical

Lending to buyers without a deposit is typical among lenders with Right to Buy. Tenants using Right to Buy in 2014/2015 received an average discount of 46%, meaning they will have been in their property for over ten years[2], leaving them with a home that they may want to make changes to when it becomes their own. Customers using Right to Buy often don’t need to make a personal deposit as lenders recognise that the discounted purchase price effectively gives them a larger amount of equity than a typical first time buyer purchasing on a mainstream product. This allows customers to use their own funds to make improvements on the property they now own.

Fiction: Eligible properties are always poor quality and in low end areas

Negative perceptions still exist around Right to Buy properties, particularly suggestions that tenants will mostly be buying into a low end or ‘slum’ property in an undesirable location. However, with house prices expected to rise by 6% across the UK in 2016[3] and significant discounts of over £100,000 available off the price of properties in London[4], tenants could actually find themselves sitting on a desirable property that is now in a highly sought after area, and with the means to purchase it.

Fact: Buying could make more sense

For many tenants, especially those that have been in their property a long time, buying their property could make a lot more sense than continuing to rent. Furthermore, as part of the 2015 Summer Budget, the Chancellor introduced lower thresholds for the Pay to Stay scheme, making it compulsory for social landlords to charge market or near market rents to families with incomes of over £30,000 and over £40,000 in London. These customers could find themselves with higher monthly payments, which has the potential to make a mortgage a more attractive prospect.

Fiction: It reduces stock

One of the main criticisms of Right to Buy is that it reduces the amount of affordable housing stock available to those who need it the most. However, the Government has pledged to use the money made from extra sales since 2012 to build new affordable homes on a one for one basis.[5]

Fact: Buyers need to know what they’re getting themselves into

There are often concerns that eligible buyers for Right to Buy might not fully understand what they are giving up when they switch from renting to owning their property, for example having to pay for their own repairs and service charges. Buyers also need to be well aware of the difference between being eligible for the scheme and being able to afford it.

To assist with this, the Government is aiming to increase the use of its Right to Buy Agents service, a free impartial advice service which aims to guide buyers through the entire process – from understanding their eligibility and working out their discount to finding a solicitor.

To discuss Right to Buy and the options available with one of our team, call 03450 50 5555.

We may monitor and/or record your telephone conversations with the Society to ensure consistent service levels (including colleague training).

Contains public sector information licensed under the Open Government Licence v3.0 - http://www.nationalarchives.gov.uk/doc/open-government-licence/version/3/)

This website is for use by FCA authorised intermediaries only. If you are not an FCA authorised intermediary and would like further information about our products or services, please visit www.leedsbuildingsociety.co.uk. If you are an FCA authorised intermediary and you reproduce any of the information on this website to be used with or to advise customers, then you must ensure that it complies with the Financial Conduct Authority's rules and guidance on financial promotions.

Leeds Building Society is a member of the Building Societies Association.

Leeds Building Society is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority. Leeds Building Society is registered on the Financial Services Register under number 164992. You can check this on the FCA website at www.fca.org.uk/firms/systems-reporting/register or by calling 0800 111 6768. Buy to Let mortgages which are for business purposes are exempt from FCA Rules.